After more than five years of being on the market, Ozempic is changing the landscape of GLP-1 drugs, but not for diabetes – for weight loss.

• Ozempic Runs Low for Diabetes Patients as Weight-Loss Use Surges
  – WSJ
• New weight loss drugs trending with billionaires and celebrities are about to enter more American homes
  – CNBC
• Wall Street hikes forecasts for anti-obesity drug sales to $100 billion and beyond. A look at the numbers
  – CNBC

Where is this weight loss narrative stemming from if GLP-1 drugs (GLPs), first introduced in 2010, help manage blood glucose of individuals who have type-2 diabetes? A recent clinical trial data highlighted Ozempic’s weight loss capabilities, even in non-diabetic patients. This was a momentous moment, as GLPs have been available for more than a decade, none have ever proved to target conditions other than blood glucose like the way that Ozempic has.

Semaglutide (the main active ingredient of Ozempic) is a class of medication known as glucagon-like peptide-1 receptor agonists that mimics the GLP-1 hormone that is released in the gastrointestinal tract, with one role of GLP-1 being to prompt the body to produce more insulin, according to the FDA. For the ongoing Ozempic story, weight loss claims are linked to reduced caloric consumption, supporting weight loss in patients.

Now, with the potential to treat obesity in addition to diabetes, Ozempic provides life changing opportunity for both diabetic and weight loss patients. However, does it provide the same opportunity for investors?

Our reaction and views

Our analysis supports that this is a big opportunity for GLP-1 drugs and agree that it can meaningfully change lives. There is the potential for broad adoption of weight loss drugs as they continue to improve, but what will it take for there to be broad adoption?

That’s the question our analysts are asking. While there is optimism that GLPs will achieve their potential for both diabetes management and weight loss, we see three hurdles - accessibility, sustainability of weight loss, and ancillary benefits - to overcome and better understand before a real investment opportunity presents in the short- to medium-term.

Overall, to say these drugs will save and extend lives just isn’t enough to promote broad adoption – there’s still a cost limit. Right now, the drug is too expensive with co-pays between $100-200 per month for the patient. Cost is just one half of the conversation – coverage is the other. Currently, providers are conscious of the impact the drug can have for obesity and weight loss, however, none are covering it as the ‘miracle’ drug that headlines have made it out to be. There is decent coverage for it now, but coverage policies move slower than public image, so this is an area to monitor for changes. Both current cost and coverage policies are hindering accessibility.

Sustainability of weight loss is the next hurdle. The weight loss we’ve seen from GLPs, while meaningful, leaves questions as to whether if it’s long-lasting. The clinical trials measured out to 12-14 months. That’s a decent timeframe, but not a full picture. Further, those on the clinical trials were required, and monitored, to have a calorie restricted diet and incorporate regular physical activity into their routine. A more controlled, disciplined study than real life tends to be.

And lastly, ancillary benefits are the final hurdle to better understand before the opportunity is fully realized. The health benefits of weight loss, while intuitive to some degree, are not clear cut. There are many factors including lifestyle (even alcohol consumption skew plays into this), genetics, and social factors that are difficult to fully incorporate in clinical trials. For example, the select trial data, which showed reduced cardiac events for those on Wegovy (Ozempic’s higher dose, weight-loss specific sibling) did show a 20% reduction in cardiac events. That’s a good thing. But even those that were on placebo showed a significant reduction in events (though not as much as those on drug). In simplistic terms, when compared to placebo, the benefit, while not insignificant, is also not major.

We believe it’s too early to understand the full potential and opportunity GLP-1 drugs provide beyond diabetes management.

Are there impacts to other sectors?

Looking beyond the opportunity in the life sciences sector, many investors were quick to hypothesize other sectors that would be impacted by weight loss drugs.

Consumer packaged goods were an initial focus area as reduced caloric consumption corresponds to less snacking. Walmart CEO, Doug McMillion, was quick to comment on those shoppers taking GLPs are also buying less units, and therefore less calories. Overall, our analysis is that it’s too early to correlate the two together for a substantial investment impact.

At least initially, impacts will be a US-centric issue, where obesity and diabetes occur in much higher frequency. Important to understand that for many consumer-packaged goods companies, the US is but just one market. For example, the US generates less than a third of revenue for Mondelez. Overall, our analysis shows little concern for changes in snack consumption as many companies in the space have strong brands and operate in categories with lower levels of private label penetration.

There’s the saying “If innovation isn’t affordable, then it’s not innovation.” The innovation occurring with GLP-1 drugs – and the clinical trials around them to better understand the ways in which they can be utilized – are life changing. Nonetheless, until there’s more data and the overall accessibility of the drug improves, it remains an area to monitor for significant changes and opportunities to emerge.

Enjoying this information? Sign up to have new insights delivered directly to your inbox.

This material contains the opinions of Manning & Napier Advisors, LLC, which are subject to change based on evolving market and economic conditions. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product.